This summer’s transfer window closes at 5pm on 8 August. As in previous seasons, image rights have been a hot topic for a lot of players and their clubs. Getting things right at the contract negotiation stage can save a lot of headaches –including an investigation and/or fine by HMRC – later on.
What is an image right?
It’s a way for clubs to pay players for off-the-pitch commercial activities that benefit them, like endorsing products or sponsors associated with the club. This is an additional income stream, completely separate from your salary. The stream could become a handy nest egg when you hang up your boots.
What counts as an image?
Your image could include anything about you, including your face, haircut, voice, nickname and autograph, even your squad number. But you don’t have to be a Rooney or Ronaldo to get paid for using your image. If you’ve got a high profile at your club, sponsors will probably want to be associated with you, and to pay for it.
How image rights structures work
Setting up an image rights structure is a good way to keep things separate. The money you earn from the use of your image is paid directly by the club into the company, rather than as salary to you. It would then be taxed at the company rate of 19% rather than the 45% income tax rate paid as a higher earner, although there may be further tax when the money is paid to you at a later date. The money stays in your company until you need it, and you can choose to take it out after you retire.
Avoiding any pitfalls
Today, HMRC is looking very closely at how clubs pay players. A recent ruling found that payments made by a football club to an offshore service company in respect of image rights were to be treated as the player’s earnings. Every club in the English Premier League, Championship and Scottish Premier League has been warned to expect a visit where image rights payments made to players will be investigated. So, to keep the taxman onside, here are a few things to bear in mind.
First, the club needs to have a licence to use your image, usually through a company. The arrangements generally and money involved must be commercially viable. Both the club and the player have to show how the image rights are being used to help the club generate additional income. It’s also useful to know that if you’re not a resident in the UK, you can set up both UK and non-UK image rights structures. Again, to avoid any tax problems, the smart move is to get this done professionally.
Image rights can be a great way to earn additional income for the things you do outside of playing. Plus, it can be a useful retirement fund to fall back on after your playing career has ended. But each player is different, there’s no ‘one-size-fits-all’ approach, and it can’t be used as a way to get out of paying tax. So, to get the best out of your image rights arrangements, make sure you take professional advice.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.